Prove China spy allegations or “shut up”

In a radio interview airing Nov. 17 on Canadian Broadcasting Corporation, Zhang Junsai, China’s ambassador to Canada, told radio host Evan Solomon that Chinese firms are not involved in foreign espionage, “I can assure you that our companies working in other countries are strictly doing business according to the local laws.” Zhang blamed the allegations of espionage against Chinese firms on “a Cold War mentality”, and challenged anyone who claims otherwise to produce evidence or keep quiet, “If you really have the evidence, come [out] with it. If not… shut up”.

The Chinese ambassador’s comments come during a time of growing concern over Chinese investment in Canada’s natural resources. Canada’s federal government is currently reviewing a $15 billion proposed takeover of Canadian upstream oil and gas producer Nexen by China National Offshore Oil Corporation. Opposition among Canadians to the deal is widespread, with the New Democrats against the deal and with members of the Conservative caucus said to be grappling with the bid. Canada’s oil industry, however, is backing the bid in exchange for further reciprocity from China, causing the review period to be extended to Dec. 10.

The flareup in Canada comes on the heels of a scathing report released by a U.S. intelligence committee last month coinciding with the start of a high-profile espionage trial. The U.S. report warns of the security risks associated with doing business with two of China’s leading telecommunications firms, Huawei and ZTE, with evidence has been turned over to the FBI. Last week marked the start of the trial of an ex-General Motors engineer and her husband, who face allegations of stealing the auto maker’s technology in order to benefit Chinese car manufacturers. Prosecutors accuse Shanshan Du, of stealing confidential information on hybrid cars, and passing on the documents to her husband, Yu Qin, who used the data to seek partnerships or employment with the Chinese car manufacturer Chery Automobile. GM considers the value of the secrets to be worth more than $40 million, while the defendant’s lawyer said that the case reflects U.S. xenophobia and that the secrets at issue were “completely useless” for the companies the couple approached. The case adds to a growing list of similar allegations in which people of Chinese descent are accused of stealing trade secrets from U.S. companies with the intention to sell to Chinese buyers.

The espionage is not only taking place on foreign soil – many foreign companies sell their products to China or have been asked to set up research and development facilities in China. Last May, a Chinese researcher at WuXi PharmaTech was found guilty by a Shanghai court of stealing and selling patented medical compounds from U.S. pharmaceutical giant Merck & Co. The court ruled that Wang Hui had stolen two Merck compounds while they were being tested in China. The court sentenced the man to 18 months probation and ordered him to pay around $7,000 in restitution. Merck has been Wuxi PharmaTech’s single biggest customer by revenue in recent years.

Why pick on the Chinese? After all, every nation has its spies trying to obtain information. China stands out not only for stealing information but technology, in a desperate bid to compete economically in green technologies, new information technologies, biology, and high-end manufacturing with the likes of the U.S. and Japan. China also stands out for the volume of its efforts. The U.S. National Counterintelligence Executive’s 2011 report to the U.S. Congress on industrial espionage publicly identified Chinese actors as “the world’s most active and persistent perpetrators of economic espionage.” The report noted that of the seven cases litigated in 2010 under the U.S. Economic Espionage Act of 1996, six involved China.

Obviously, the recent display of unabashed arrogance by China’s representative to Canada is no way to win friends and influence people, especially when in need of their resources. China is now a world economic power after making historical leaps in pulling record amounts of people out of poverty, and now graduates more than 900,000 science, mathematics and engineering graduates every year. Maybe now is the time to shift the focus to developing indigenous technologies instead of taking toys from others and denying responsibility.

“Shanshan Du, 53, former engineer at General Motors along with husband Yu
Qin, 51, have been found guilty of stealing trade secrets with regard
to hybrid vehicles from General Motors and selling the same to China’s
Chery Automobile Co….The couple now faces upto 10 years of imprisonment and fines to the tune of $250,000 on the charges of selling trade secrets. They also face 20 years imprisonment and $250,000 fine on the charge of wire fraud. The
sentence will be announced in February 2013.”

http://www.facebook.com/gary.sands.315 Gary Sands

Today, the Canadian government approved Chinese energy conglomerate CNOOC’s US$15.1 billion takeover bid for oil and gas company Nexen, which would be China’s largest foreign acquisition. The bid sparked an in-depth government review due to its value and CNOOC’s state-owned status. The transaction is considered to have overcome its biggest hurdle, although the deal is still subject to US and UK approval, as the company has significant assets in both countries.

Canada’s Industry Minister Christian Paradis said the country won “significant undertakings” from CNOOC on matters of transparency and management. It will be interesting to discover what will be those “significant undertakings”…

Author

Gary Sands

Gary Sands is a Senior Analyst at Wikistrat, a crowdsourced consultancy, and a Director at Highway West Capital Advisors, a venture capital, project finance and political risk advisory. He has contributed a number of op-eds for the South China Morning Post, U.S. News and World Report, Washington Times, The Diplomat, International Policy Digest, Eurasia Review, and Indo-Pacific Review. He was previously employed in lending and advisory roles at Shell Capital, ABB Structured Finance, and the U.S. Overseas Private Investment Corporation. He earned his Masters of Business Administration in International Business from the George Washington University in Washington, D.C. and a Bachelor of Science in Finance at the University of Connecticut in Storrs, Connecticut. He spent six years in Shanghai from 2006-2012, four years in Rio de Janeiro, and is currently based in Ho Chi Minh City, Vietnam.